Liberalizing China's capital account may impose profound implications on the RMB exchange rate, monetary policy autonomy, Chinese and the world economy. Owing to the scarcity of proper measurements for China's capital controls, rigorous studies on the effectiveness and implications of China's...

Abstract: We examine how China's capital controls affect the volatility of the renminbi (RMB) covered interest deviation (CID). We find that capital controls not only drive up the level of the RMB CID, but also cause the CID to be more volatile, highlighting the tradeoff between the role of...